Local IT hardware sector can generate 4 lakh jobs: MAIT

New Delhi: Feb 24, 2016

IT hardware sector can generate four lakh jobs over five years if the government rectifies the tax duty structure in the Budget to encourage manufacturing of products such as notebook and desktop personal computers in India, says a study by industry body MAIT.

“Measures of the Union Budget 2016-17 can potentially generate 4,00,000 jobs in the Indian IT manufacturing sector if estimated demand for 30 million PCs per annum is fulfilled entirely through domestic production over the next five years,” MAIT Executive Director Anwar Shirpurwala said while sharing details of the study.

The total estimated jobs include 1 lakh direct employment and 3 lakh jobs in component manufacturing over the next five years, the study noted.

Policy reforms and plugging market ecosystem gaps can lead to doubling of IT hardware production in one year to USD 2.6 billion and make India become a global electronic system design and manufacturing (ESDM) supply hub, it added.

The study is based on data from some members of the Manufacturers’ Association for Information Technology (MAIT), which includes chip-maker Intel, PC maker Lenovo and software giant Microsoft.

The IT hardware industry through the Manufacturers’ Association for Information Technology (MAIT) has suggested to the government that the differential excise duty regime introduced in 2015 for mobile phones and tablets be extended to notebook PCs and desktop PCs (personal computers) to encourage domestic manufacturing of IT products.

The differential duty regime requires the excise duty on notebook PCs and desktop PCs to be brought down to 2 per cent without any facility for input tax credits.

MAIT has sought exemption from excise duty for parts, components and sub-assemblies that go into manufacturing of PCs.

The excise duty structure for mobile handsets was changed to 1 per cent without Cenvat credit, or 12.5 per cent with Cenvat credit, which gave domestic manufacturers cost benefit of about 11 per cent over imported phones.

The current fiscal saw investments in India from the world’s biggest contract manufacturer Foxconn while many others such as Gionee, Xiaomi, Lava, Karbonn, HTC, Datawind, started production of their handsets locally. The mobile phone production in the country shot up by over 90 per cent to 100 million smartphones a year.

“Due to various disabilities impacting domestic manufacturers, a large part of this (India) market is being served by imported products, mostly from China,” Shirpurwala noted.

According to MAIT, the revenue share of domestic manufacturers stood at only 45 per cent of the total ESDM market of USD 31.6 billion in 2015 and the figure was even lower at around 32 per cent for the IT product market of USD 5.8 billion.

The study made a case for steps to be taken by the government to provide competitive advantage for exports of IT products from India.

It suggested that the government should take steps to attract component manufacturers, which would provide a base for global players to establish their presence and invest in India.